150th Anniversary of Capital: Reading Wage-Labour and Capital (Part II)

This post is second in the two-part commemoration of Capital’s 150th anniversary (last year); part I was a commentary on Francis Wheen’s biography of Capital and Part II undertakes a critical engagement with Wage-Labour and Capital (available freely at Marxists.org), which were originally lectures, and later published as a set of articles in 1849 in the Neue Rheinische Zeitung (which roughly translates into the ‘New Rhenish Newspaper’). Marx had delivered the lectures at the German Working Men’s Club of Brussels in 1847, a year before the publication of the Communist Manifesto and twenty years before the publication of Das Kapital.

wage labour capitalWage-Labour and Capital is made up of 9 short chapters, with the largest chapter containing 5 pages, and a total of 48 pages. In the introduction, F. Engels provides his reasons for altering the original text of Marx, and writes “this pamphlet is not as Marx wrote it in 1849, but approximately as Marx would have written it in 1891” (p. 6). To assess the merits of Engel’s editorial intervention, one needs to compare it with Marx’s original. Marx intended his writings to be understood by the workers and therefore they do not “presuppose a knowledge of even the most elementary notions of political economy” (p. 16).

In capitalism, according to Marx, “it appears that the capitalist buys their labour with money, and that for money they sell him their labour. But this is merely an illusion. What they actually sell to the capitalist for money is their labour-power” (p. 17). Therefore, labour-power “is a commodity, no more, no less so than is the sugar. The first is measured by the clock, the other by the scales” (p. 17). And wages is the “special name for the price of labour-power”, a “peculiar commodity”. The wage-workers, who owns labour-power, does not really have a choice in deciding whether to sell it to the capitalist or not, but is forced to “in order to live” (p. 19). While it appears that the worker has a choice, in essence, she does not (this idea can help transform the dominant labour-leisure trade-off story). Then Marx points out that this feature – the idea of free labour – is particular to capitalism, and not found in slave or feudal societies. While the worker owns labour-power, the capitalist owns “raw materials, tools, and means of life” (p. 20). The following description of work (and life) deserves to be quoted in full.

“Life for him begins where this activity [work] ceases, at the table, at the tavern, in bed. The 12 hours’ work, on the other hand, has no meaning for him as weaving, spinning, boring, and so on, but only as earnings, which enable him to sit down at a table, to take his seat in the tavern, and to lie down in a bed.” (p. 19)

Subsequently, Marx discusses the determination of commodity prices, which contains an account of competition. The latter is studied in three parts: “among the sellers”, “among the buyers”, and “between the buyers and the sellers” (p. 21). It is this competition which seeks the highest “customary profits” among the different sectors, and this constant “immigration” (p. 23) tends to equalise the rate of profits across sectors. This force of competition also tends to bring the actual price of a commodity close to its “cost of production” (p. 24). The “fluctuations” occasioned by competition is not an “accident” or exception but the “law” contrary to the accounts of the “bourgeois economists” (p. 24). Thus, “In the totality of this disorderly movement is to be found its order” (p. 24).

Wages are regulated by the cost of production of labour-power, which “is the cost required for the maintenance of the labourer as a labourer, and for his education and training as a labourer” (p. 26). In other words, it is “the cost of the existence and propagation of the worker” (p. 27). Here, Marx is referring to the wages for the entire class of workers and not of an individual worker because “millions of workers, do not receive enough to be able to exist and to propagate themselves” (p. 27).

Most economists define capital as produced means of production, and this is the starting point of their analysis. But Marx pushes the starting point further and rightly labels capital as “accumulated labour”, as the raw materials, instruments, and machines were also created by labour. Capital is also a “social relation of production” (p. 29). As noted earlier, the existence of wage labour is a characteristic of capitalism where workers are forced to sell their labour power to the capitalist in order to live. And as Marx writes, “The existence of a class which possesses nothing but the ability to work is a necessary presupposition of capital” (p. 30). Furthermore, capital, or accumulated labour dominates living labour.

Mainstream (marginalist) economics is built on the marginal productivity theory of distribution which states that under conditions of perfect competition, in equilibrium, workers are paid the marginal product of capital and capitalists get the marginal product of capital – a harmonious explanation of income distribution. In contrast, Marx argues that wages are profit are inversely related pointing to the fundamental conflict characterising income distribution in a capitalist society (p. 37). In the same chapter (VII), Marx outlines two major routes through which profits increase: (1) increase in aggregate demand and (2) technological improvements (see an earlier post on the link between demand, profits, and employment). In the following chapter, Marx reiterates the distributional conflict: “the interests of capitals and the interests of wage-labour are diametrically opposed to each other” (p. 39). And “If capital grows rapidly, wages may rise, but the profit of capital rises disproportionately faster. The material position of the worker has improved, but at the cost of his social position. The social chasm that separates him from the capitalist has widened” (p. 40). This underscores the social nature of economic relations, an aspect which marginalist economics has eschewed with its assumption of the independence of individual preferences.

The following remark about economists by Marx is appropriate for our current times: “The economists tell us, to be sure, that those labourers who have been rendered superfluous by machinery find new venues of employment” (p. 45). I shall end this post by quoting Marx on capitalist accumulation, crises, and exploitation of markets, since it continues to remain relevant today.

“…capitalists are compelled … to exploit the already existing gigantic means of production on an ever-increasing scale, and for this purpose to set in motion all the mainsprings of credit, in the same measure do they increase the industrial earthquakes, in the midst of which the commercial world can preserve itself only by sacrificing a portion of its wealth, its products, and even its forces of production, to the gods of the lower world – in short, the crises increase. They become more frequent and more violent, if for no other reason, than for this alone, that in the same measure in which the mass of products grows, and therefore the needs for extensive markets, in the same measure does the world market shrink ever more, and ever fewer markets remain to be exploited, since every previous crisis has subjected to the commerce of the world a hitherto unconquered or but superficially exploited market” (pp. 47-8)

 

 

 

To Economists: please pay attention to the ‘real’ problems

A talk by Arundhati Roy and watching Peepli Live has motivated the contents of this post largely. I have been forced to rethink what ‘economics’ as a discipline should do in a country like India. How can it contribute to economic growth and human development. It is often forgotten that, economics studies the big black box that transforms the labour of the labourers into commodities for consumption by the labourers. People or rather, people who work, appear at both the ends of the tunnel. The black box or the tunnel consists of varied actors, markets, institutions, laws, power groups, social classes, etc.

Some economists try to make sense of this complex interaction using tools such as game theory, which throws light of certain aspects of the interaction. This in turn is supposed to aid in the design of better institutions. A few study labour, the main actor in the whole economic process. Some look at institutions and how various legal arrangements affect the economic outcomes. It remains to be asked: outcomes for whom? In this manner, the entire profession of economics has been divided into various sub-disciplines, each specialising in a particular aspect of the economy. And it is evident that communication between the above mentioned sets of economists happen rarely. Very often, the larger picture is forgotten. Each group presents their results with a tremendous sense of certainty, which is entirely misplaced. And, the joke that economists love their ceteris paribus clause comes true here. Except that, the clause in this case, assumes as constant the remaining processes or aspects of the economy!

Who are the real producers in an economy? What role do farmers (small, marginal and large) play in our society? Do they live in dignity? When inflation occurs, do these farmers get more incomes? Or do the intermediaries pocket the increase? Are proper institutions in place to provide them with adequate credit? Can these formal institutions compete with the informal ones, such as money lenders and chitti funds?

It is accepted that farming is not a profitable enterprise any more. Policy makers are calling for industrialisation. They want the farmers to come away from their lands and work in industries. And so arises the slums in and around major cities, where their living conditions are perhaps worse than in the villages. Or, most of them are forced to become construction workers. Urbanisation implies buildings, which creates construction jobs in plenty. Once the space in big cities are exhausted, the urbanisation will take place in small cities. Workers will be in demand. In short, labour migration and increasing labour distress, owing to improper housing conditions will become even more intense. It is time, serious attention is paid to farmers and the role of farming in the development of India.

To conclude, it is time we paid more attention to the condition of India and not blindly follow academic fashions. It is the duty of the civil society and especially, the academicians to study the problems and issues thrown up by the society. When the problems of the majority of the population in India –those who live in the rural areas, those who work in the informal sector and those who are farmers– are forgotten and relegated as “deviations from the normal” or “problems of the Indian economy” and not as characteristics of the society we live in, it is indeed a pitiable situation.